FERC yesterday approved a contested settlement in whichTennessee Gas Pipeline agreed to offer a discounted transportationto its shippers using the Perryville, LA, hub. This action isintended to further the development of Perryville as a marketcenter.

The settlement was supported or not opposed by a majority ofTennessee’s customers involved in the proceedings. Only the KeySpanDelivery Companies and the New York Public Service Commission(NYPSC) objected to the deal.

While the two companies did not oppose the “primary practicalconsequence” of the settlement — the discounted transportationrate on Tennessee at Perryville — they seriously doubted itwould resolve the greater problem: that Tennessee’s rate structureis allegedly inhibiting the development of market centers.

In Wednesday’s order, the FERC found that KeySpan and the NYPSCcould not challenge the portion of the settlement that dealt withthe potential anticompetitive effects of Tennessee’s rate structure”because they were non-contesting parties to [a] 1996 settlement”between the pipeline and its customers. “KeySpan and the NYPSC are,in essence, seeking to revoke their consent to the 1996 settlementafter having received all of that settlement’s benefits.”

The latest settlement is a resolution of the concerns raised byReliant Energy Gas Transmission during the negotiations of the 1996settlement, which it contested. Reliant argued that Tennessee’s useof a system-wide cost of service improperly includedproduction-area costs in its market-area rates, which it claimedinhibited the development of market centers at interconnectionswith competing pipelines.

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